Imds 10 2016 0425

Industrial Management & Data Systems
The effect of technology innovation on mobile communication and mobile

products
Eui-Bang Lee,
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The effect of
The effect of technology innovation technology
on mobile communication and innovation
mobile products
Eui-Bang Lee 1707
Department of Business Administration,
Received 7 October 2016
Division of Management Information Systems, Sogang Business School, Revised 6 January 2017
Sogang University, The Republic of Korea and Accepted 21 January 2017
Big Data Service Department – Data Streams, Seoul, The Republic of Korea
Abstract
Purpose – In order to understand the influence of technology innovation on market demand diffusion in the
ICT service market, the purpose of this paper is to examine technology innovation in the mobile product
market, which keeps a complementary relationship with the mobile communication market.
Design/methodology/approach – This study collected mobile communication user information of four
leading countries in the ICT market – the USA, the UK, Korea, and Japan from 1981 to 2014. This study
applies the Bass diffusion model to analyze the form of market demand diffusion and conducts white noise
test to verify the hypotheses.
Findings – Technology innovation of mobile communication leads to an increase in innovation effect
and a decrease in imitation effect. Thus, technology innovation of mobile communication needs to be
promoted continuously for the purpose of increasing adopters in the early stage. Besides, mobile product’s
technology innovation leads to an increase in imitation effect and a decrease in innovation effect,
because individuals were aware of the usefulness of the products and services. Hence, the increase in the
number of imitators caused a higher increase in imitation effect than in the mobile communication’s
innovation effect.
Originality/value – Based on the results of this study, the role that product and service technology
innovation plays in renewing the form of market demand diffusion in the ICT service market was defined.
Also, since the strategies and plans to acquire competitive advantage of business were understood, it may
help both companies and policy decision makers.
Keywords Bass diffusion model, Mobile communication, Technology innovation, Complement goods,
Mobile product
Paper type Research paper
1. Introduction
Mobile communication (or telecommunication) market is a typical ICT service market, which
has reached market saturation due to its rapid spread. The significance of this market
increases along with its rapid spread, and various research suggested business strategies
regarding its market situation (Corrocher and Zirulia, 2010; Dahan, 2011; Lee, Yu, Yang and
Kim, 2011; Wu and Chu, 2010). The number of users in the mobile communication market
has exceeded the total population in 105 countries of the world (Lee et al., 2015). Businesses
attract customers to use their products through technology innovation in order to secure
their competitive advantage in a saturated market, (Lee et al., 2014, 2015). Mobile
communication market continues technology innovation, which has upgraded from 1st
Generation to 4th Generation, in order to improve service quality and increase applicability.
Since technology innovation increases innovation effect and decreases imitation effect,
enterprises shorten the innovation cycle of technology in order to acquire members at the
Industrial Management & Data
early stage of technology innovation (Lee et al., 2014). Systems
Providing services requires the use of products in mobile communication market. Vol. 117 No. 8, 2017
pp. 1707-1719
Services require products that have a complementary relationship with them, meaning that © Emerald Publishing Limited
0263-5577
this market has a direct influence on another market. The mobile product market, which is DOI 10.1108/IMDS-10-2016-0425
IMDS represented by the ICT production market, has grown from the generation of feature phone
117,8 to smartphone (West and Mace, 2010). According to Gartner, smartphone shipment is
witnessing a 47 percent year-on-year increase (The Guardian, 2012). Although sales
experienced a 44 percent year-on-year increase, the sales of overall mobile device including
smartphone, ceased to increase after its 3.5 percent raise in 2012 (TechCrunch, 2014),
because of the declining sales of feature phones. Purchase of smartphone also stimulates the
1708 mobile communication market. The number of global smartphone users was recorded one
billion in 2012, and the overall adoption was fast. The global smartphone shipment
was 1,432 million units in 2015 and is expected to reach 1,870 million units in 2018
(Statista, 2016a). Korean market, which receives attention due to the rapid diffusion and
adoption of mobile, obtained 79.5 percent of total users in 2014 and the percentage is
expected to increase to 88.4 percent in 2019 (Statista, 2016b).
Through such phenomena, mobile communication market affects and is affected by the
mobile product market. In other words, the ICT service market receives influence from not
only technology innovation of service but also technology innovation of product. Such
relationship is described as complementary relationship in terms of economics and the term
complement goods is used. Because such complement goods could greatly affect market
demand diffusion, they should be studied together. However, current research emphasizes
only the technology innovation of the service market (Lee et al., 2014, 2015; Lee, Park, Kim and
Lee, 2012; Lee, Trimi and Kim, 2012; Lee, Yu, Yang and Kim, 2011). Therefore, this study
attempted to clarify the cause of changes in diffusion, by dividing the effects of technology
innovation into direct effect (effect caused by technology innovation of mobile communication)
and indirect effect (effect caused by technology innovation of mobile products).
Therefore, the purpose of this study is to examine the impact on demand diffusion in the
mobile communication markets of the USA, the UK, Korea, and Japan, the four leading
countries of the ICT industry, by dividing the influence factors into service technology
innovation and product technology innovation.
2. Theoretical background
2.1 Technology innovation and demand diffusion
The term technology innovation is originated from the word “Neuerung (innovation)”
according to Schumpeter (1934). Schumpeter (1934) stated that economics are organisms
composed by various cells that constantly die and to be substituted by superior ones; such
organisms grow and develop due to the process of creative destruction called technology
innovation. Schumpeter (1934) addressed that technology innovation does not only mean
the development of technology, but also refers to all the opportunities that create profits by
giving a shock to or causing changes in the economy, such as the development of new
markets, changes in the way of providing products, etc.
Schumpeter (1934) argued that although enterprisers hold a monopoly to obtain
greater profits through technology innovation, the monopoly would be lost due to
imitation and the profits of technology innovation would be eroded due to imitation or new
technology innovation.
Christensen (1997) reinforced the argument by classifying technology innovation into
sustaining innovation and disruptive innovation. Sustaining innovation means that
innovation is in compliance with the consumers’ order of priority and is made at proper
speed. On the other hand, disruptive innovation means that technology is separated to the
mainstream of market, because technology is developed at excessively faster speed than the
market requires (overshooting). Disruptive innovation changes the existing s-curve; the new
s-curve does not overlap with the former s-curve, but instead rising to a higher level.
Afterwards, Hague (2002) used the phenomenon of rejuvenation in product lifecycle, which
is represented by the product demand curve, to explain the influence of technology.
Rejuvenation was demonstrated by an example of the freshness of baking soda products, The effect of
with suggestions of new utilization methods (Small Business Marketing Strategies, 2009). technology
Similar to the above phenomenon, during the stasis of growth in the current generation’s innovation
mobile communication market, product lifecycle is renewed through technology innovation
(Lee et al., 2014, 2015). A variety of studies addressed the issue of such technology
innovation as shown in Table I.
1709
2.2 Changes in technology generations and market demand diffusion in mobile
communication market
Technology innovation of mobile communication could be divided into four generations
depending on transmission speed. 1st Generation was analog technology and had the role of
voice communication. 2nd Generation had the transmission speed of 153.6 Kbps, 3rd Generation,
Researcher Contents The result about technology innovation
Schumpeter (1934) Economic development occurs with The process of economic growth involves
quantitative expansion of and changes in supply structure such as labor
qualitative changes in the economy growth, accumulation of capital, technology
innovation, new sources development,
structure improvement, and changes in
demand structure such as changes in scale and
component of population, income level,
preference, and organization improvement
Schumpeter (1942) Gave insights into the fate of capitalism, Monopoly may be achieved through economic
several contradiction of democracy from scale, efficiency, and technology innovation
the aspect of politics and sociology
beyond the field of pure economics
Lundavll (1992) The national system innovation of Stressed the significance of the social
Denmark is confirmed using the export interaction between customers and suppliers
and import data of OECD countries according to the innovation of national system
Nelson (1993) Characteristics and implications of Analyzed the economic structure of national
technology innovation of the national system, and figured out the difference in
system in six high-income countries and national system’s technology innovation
five low-income countries through historical analysis on technology
development and period of R&D, etc.
Freeman and Economic innovation was explained by Technology innovation exists at the center of
Soete (1997) various aspects like technology arguments of economic theory, and plays the
innovation, business cycle, industrial main role on decision making
revolution
Christensen (1997) Divided technology innovation into Suggested that collapse of innovation occurs
sustaining innovation and disruptive due to overshooting, and derived solutions for it
innovation for analysis
Hague (2002) Address the planning methodology and Made suggestions on rejuvenating product
evaluation methodology for doing lifecycle
market research
Lee et al. (2014) Clarify the changes in the forms of Market saturation positively changes
demand diffusion by saturation and innovation effect but does not change
technology innovation imitation effect. Technology innovation
positively changes innovation effect but
negatively change imitation effect
Lee et al. (2015) Clarify the changes in the forms of Same form of rejuvenation occurred in both
demand diffusion due to the cultural the USA and Korea through technology
differences between the USA and South innovation Table I.
Korea using technology innovation, A study on the
saturation, etc. technology innovation
IMDS 14.4 Mbps, and 4th Generation was upgraded to 75 Mbps (Lee et al., 2014). Faster speed enabled
117,8 the utilization of more services as shown in Table II. In addition to voice communication and
video calls, the use of internet has been enabled.
In the mobile communication market, a variety of studies focused on market demand
diffusion, as shown in Table III. These studies are done on the basis of Rogers’ (1982) innovation
diffusion theory, which explains diffusion phenomena by categorizing them into innovator,
1710 opinion leader or early adapters, early majority, late majority, laggards or late adapters based
on standard normal distribution. Bass (1969) divided market demand diffusion into innovator
and imitator. The value of innovator equals to p(m − Nt) and the value of imitator equals to
(q/m)Nt (m − Nt). Within the formula, m refers to potential member and Nt refers to the
accumulated members at time t. That is, the extent of influence could be calculated using p and
q, which are defined as innovation and imitation effects, respectively. Afterwards, a variety of
studies applied such models, and the most famous one was the comparison between M-form
(multi-divisional structure) and joint venture (Mahajan et al., 1988; Venkatraman et al., 1994).
Technology innovation is rejuvenating to the form of demand diffusion (Hague, 2002).
Butler (1980) suggested the concept of rejuvenation, which changed the concept that a
product’s lifecycle cannot be reversed. That is, once demand diffusion lasts until reaching
saturation, the forms of diffusion will become disappearance, maintenance, and
rejuvenation, respectively. This is in contradiction with Bass’ (1969) suggestion that
innovation effect and imitation effect are presented by constants. That is to say, imitation
effect and innovation effect can change after saturation, and such changes can be measured
to derive strategic implications (Lee et al., 2015).
1G 2G 3G 4G Source
Table II.
Adoption of Year of adoption The USA 1983 1992 2003 2010 Lee et al. (2015)
each generation of Korea 1985 1996 2003 2011
the mobile Europe 1981 1995 2003 2011
communications Japan 1979 1991 2001 2010
technology Transmission speed – 153.6 Kbps 14.4 Mbps 75 Mbps Lee et al. (2014)
Researcher Contents
Corrocher and Measure the change in diffusion in the saturated mobile communication market
Zirulia (2010)
Wu and Chu (2010) Prove that the mobile communication was saturated by using diffusion theory
Dahan (2011) Examine the technology innovation and diffusion in the ICT market and prove the
saturation of the market
Lee, Trimi, Byun and Analyze the mobile market (iPhone) and Metaverse service market by using
Kang (2011) diffusion theory, and then prove that the mobile market was saturated and the
Metaverse was growing
Lee, Yu, Yang and The reasons and directions of churn of the three mobile communication
Kim (2011) companies in South Korea through diffusion theory
Lee, Trimi and Kim (2012) Prove the differences in mobile communication market due to cultural differences
by dividing the markets into Type 1 and Type 2
Lee, Park, Kim and Examine the three mobile communication companies in South Korea and
Table III. Lee (2012) suggested that first mover has higher imitation effect than followers while
A study on the follower has high innovation effect
diffusion theory Lee et al. (2013) Examine mobile market and Hyundai car market by using diffusion theory, and
based on mobile found that there are differences in technology adoption
communication Yang et al. (2013) Showed the differences in entrance barrier between ICT companies and non-ICT
market companies by using diffusion theory
2.3 Technology change and complementary relationship of the ICT product market The effect of
Mobile phone market and mobile communication market could be considered as complement technology
goods that have a complementary relationship. Complement good is a term used in the subject of innovation
economics, meaning that the utility is higher when two goods are consumed together than the
sum of utility when they are consumed separately. That is to say, not only mobile
communication service but also mobile phones are required for voice communication and
wireless communication. Therefore, mobile phone, a typical product market within the ICT 1711
market, commercialized the technology in mobile communication or mobile-cellular market, and
the developments keep pace with the commercialization. 1st Generation means mobile
communication from analog technology that was developed in 1973 and commercialized
(e.g. DynaTAC 8000x, MicroTAC). 2nd Generation technology refers to digital technology: global
system for mobile communications technology, a variety of products were developed and
commercialized (e.g. Nokia 1011, StarTAC). In addition, various useful technologies were
developed and products were included, such as: short message service (1993)[1], camera (1999)[2],
MPEG audio layer-3 (2001)[3], multimedia message service (2001)[4], digital multimedia
broadcasting (2005)[5], etc. 3rd Generation’s service technology innovation was similar with 2nd
Generation technology in the early stage. However, a new system has been structured and the
usefulness was maximized because of the development of smartphone, which was started in
2007 by iPhone. Thus, the adoption of new technology increased. However, it took time until
iPhone revitalized. Apples’ iPhone first came to the market in the USA, and then was put on sale
in the UK, Germany, France, etc., which received a cyclonic popular reception. Japan and Korea
started selling iPhone 3GS since 2009 (West and Mace, 2010). After the launch of smartphone,
mobile-cellular subscriptions increased from two billion in 2005 (total population was seven
billion) to more than six billion in 2011, and then 6.8 billion in 2013 with a penetration rate of
96 percent (ITU, 2013).
3. Research model and hypotheses

3.1 Research model
This study examines the influence of technology innovation on market demand diffusion in
mobile communication market, which is a typical ICT market. It analyzed the influence from
two aspects: influence of service in the market and the product that has a complementary
relationship with the service. In order to figure out market diffusion, this study derives
innovation effect and imitation effect, and then applies white noise test to verify them.
The methods of verification are Mahajan et al.’s (1988) F-test and Venkatraman et al.’s (1994)
J-test. J-test decides whether to reject the null hypothesis and accept the alternative
hypothesis by comparing the null hypothesis (Model 1) and the alternative hypothesis
(Model 2), and it is used to compare the non-nested alternative model (Derbaix, 1995).
The null hypothesis is rejected if the research result falls within the significance level.
Hypotheses on technology innovation of service and technology innovation of product are
verified by comparing the value of the results (Figure 1).
3.2 Research hypothesis

3.2.1 Technology innovation of service. The complementary relationship between mobile
product market and mobile communication market may be concerned, since technology
innovation in mobile product market has an influence on mobile communication. Especially
the diffusion of smartphone, the most important innovation in the mobile product market,
has a considerable significance (West and Mace, 2010). At the early stage, such technology
innovation causes different forms of innovation of service in mobile communication market,
and the forms of innovation changed because of the rejuvenation of market demand diffusion.
However, from the service aspect, technology innovation has a different form because post
IMDS H1: Technology innovation of service
117,8
Innovation effect
Mobile communication
market adoption
diffusion
Imitation effect
1712
Figure 1.
Research result H2: Technology innovation of product
(complement goods)
adopters have not had a chance to try the new technology. That is, only few innovators
attempted to adopt new technology, while many users intended to tag along with other users
to make purchases due to the high usefulness of the new technology. Thus, the number of
imitators was expected to be increased. Therefore, this study verifies the influence of such
services’ technology innovation through the hypotheses below:
H1. Technology innovation of service has an impact on diffusion of ICT service.
H1a. Technology innovation of the service has a positive (+) impact on innovation effects.
H1b. Technology innovation of the service has a negative (−) impact on imitation effects.
3.2.2 Technology innovation of product. Technology innovation is described by
the situation that existing cells are replaced by new cells when they die, and cells could
be substituted by products in this description (Schumpeter, 1942). Hague (2002) associated
the replacements of new products due to such technology innovation with rejuvenation in
the product’s lifecycle. Former product diffusion curves are newly changed by technology
innovation. Lee et al. (2014) suggested that innovation effect changes positively because the
request of new technology gradually increases after the post adopters fully utilized current
technology in the mobile communication market. However, imitation effect decreases due to
the enhancement of competition and decrease in influence. Lee et al. (2015) stated that
technology innovation increases adopters’ understanding on product and increases their
expectation in the ICT market. Thus, the adopter group makes technology innovation to be
adopted quickly in the early stage and strengthens the innovation effect. On the other hand,
the absolution of former generations’ ICT products weakens imitation effect. However, such
research focused on the time when the mainstream was voice communication and internet
was only partially utilized in the mobile communication market. They failed to explain the
adoption of 4th Generation technology, when the usefulness of PC caused dramatic changes.
Therefore, this study makes the following hypotheses to examine the influence of such
services’ technology innovation:
H2. Technology innovation of product has an impact on diffusion of ICT service.
H2a. Technology innovation of the product has a negative (−) impact on innovation effects.
H2b. Technology innovation of the product has a positive (+) impact on imitation effects.
4. Data collection, research method, and result

4.1 Data collection
This study examines the ICT market in the USA, Korea, the UK, and Japan. The American
market has 311,587.8 thousand users, which is 4.5 percent of the world population of
6,975,114 thousand. Enterprises such as Apple, Google, and Microsoft lead the ICT market The effect of
(OECD, 2013). The penetration rate of mobile communication, an ICT service market, was technology
95.73 percent in the USA in 2011, higher than the world penetration rate of 86 percent. innovation
Number of users over the age of 15 exceeded 100 percent in 2008 (ITU, 2012; OECD, 2013).
Korean market started to adopt 1st Generation technology in 1984 and 2nd Generation
technology in 1996. The speed of technology innovation at the early stage was slow, but it
rapidly grew several times since later 1996. The Korean ICT’s development index ranked 1713
first in 2011 due to the continuous technology innovation. According to its impact and
market saturation, the ICT market could be said as a good market (Lee et al., 2014).
The Japanese market first started mobile communication service in the world and its
technology innovation is the fastest in the world. The English market is a representative
market of the European market. In order to examine the mobile communication market, this
study used the data of ITU World Telecommunication[6], which is the official statistical
resource of ITU that obtains high responsibility.
4.2 Research method

This study conducts an analysis on the mobile communication market by applying the most
frequently used Bass diffusion model, and it uses SAS Software as the analysis tool.
According to Bass (1969) and Mahajan et al. (1988), this study uses the white noise test to
examine the diffusion model and uses the null hypothesis to verify whether the patterns of
data are all random. The imitation effect and innovation effect within the significance level
would be derived by this method. This could be represented by the following equation
(Lee, Trimi and Kim, 2012):
xðt Þ ¼ xðt1Þ þeðt Þ (1)
where x(t) is the number of adopters at time t, and the residuals e(t) have a zero mean.
Mahajan et al. (1988) derived the following equation as below through ordinary least
squares (OLS) regression according to the white noise test (Lee, Trimi and Kim, 2012):
xðt Þ ¼ b1 xðt1Þþb2 N n ðt1Þþeðt Þ (2)

where, β1 ¼ 1 + q − p, β1 W1, β2 ¼ −q/m, β2 o0, and:
N n ðt1Þ ¼ N 2 ðt1ÞN 2 ðt2Þ:

Such OLS method may have low explanation power, while multicollinearity and non-
availability may also exist (Lee, Trimi and Kim, 2012; Mahajan et al., 1990). Therefore, this
study applies the Bass diffusion model through nonlinear least squares estimation, which
was first used by Srinivasan et al. (1986) to examine the Bass diffusion model. This method
has higher explanation power than Venkatraman et al.’s (1994) OLS methodology and thus
has been used in various studies (Lee, Park, Kim and Lee, 2012; Lee, Trimi, Byun and Kang,
2011; Lee, Trimi and Kim, 2012; Lee et al., 2013, 2014, 2015; Lee, Yu, Yang and Kim, 2011).
It is shown as in the following equation:
" #
1expððp þqÞt Þ 1expððp þqÞðt1ÞÞ
xðt Þ ¼ m (3)
1 þ qpexpððp þqÞt Þ 1 þ qpexpððp þqÞðt1ÞÞ
m is the number of potential demanders, t is time, and x(t) is the demand at the
corresponding time (Lee, Trimi and Kim, 2012; Lee et al., 2013). That is, the number of
potential demanders m used in this study was 51.57 million in Korean, 127.1 million in
Japan, 318.89 million in the USA, and 63.74 million in the UK according to the
IMDS standard of July 2014 est. CIA. Furthermore, the change in demand diffusion is examined in
117,8 order to analyze the influence of technology innovation. Bass (1969) suggested that the form
of product demand’s innovation does not change until the product’s lifecycle ends, and he
derived the expected value through demand forecast method. Hague (2002) addressed that
the forms of innovation rejuvenate due to technology innovation. This study seeks
rejuvenation in the ICT service market, especially the rejuvenation of products and services,
1714 which are the two types of technology innovation. For this purpose, analysis is done for each
time period starting from 1st Generation until 4th Generation.
4.3 Analysis result

4.3.1 H1. In order to examine the influence of service technology innovation on the ICT service
market’s demand diffusion, this study analyzed the 1st Generation, the 1st and 2nd Generation,
the 1st through 3rd generation, and the 1st through 4th generation as shown in Table IV. The
analysis results show that when the generation of service technology innovation is renewed,
innovation effect increased in principle (Korea: 0.000001315→0.000022→0.000048→0.00012,
Japan: 0.000005827→0.000012→0.000022→0.000066, the USA: 0.000256→0.000021→
0.000482→0.000812, the UK: 0.00005→0.000048→0.000073→0.000124) and imitation effect
Korea 1st Generation ~2G ~3G ~4G

1984~1994 1984~2004 1984~2010 1984~2014
p 0.000001315 0.000022 0.000048 0.00012
q 1.046 0.7906 0.719 0.6375
F value 73.22*** 12.56*** 13.26*** 14.96***
R2 0.9929 0.8624 0.6561 0.6073
Null value α¼0 α¼0 α¼0 α¼0
Test statistics 5.94*** 5.53*** 3.10*** 2.93***
Japan 1st Generation ~2G ~3G ~4G
(100thousand) 1981~1990 1981~2000 1981~2009 1981~2014
P 0.000005827 0.000012 0.000022 0.000066
q 0.8405 0.7392 0.6681 0.5768
F value 48.58*** 3.38*** 8.84*** 10.26***
R2 0.9869 0.864 0.743 0.7182
Test statistics 4.76*** 3.24*** 2.32** 1.70*
The USA 1st Generation ~2G ~3G ~4G
1984~1991 1984~2002 1984~2009 1984~2014
Bass diffusion model
p 0.000256 0.000021 0.000482 0.000812
q 0.6403 0.5375 0.3747 0.3327
F value 9.49* 7.03*** 50.64*** 92.65***
R2 0.9643 0.9168 0.8498 0.8241
White noise test
Test statistics −0.15 (0.89) −2.99*** 2.89*** 4.01***
UK 1st Generation ~2G ~3G ~4G
1985~1994 1985~2002 1985~2010 1985~2014
p 0.00005 0.000048 0.000073 0.000124
q 0.8416 0.7409 0.6882 0.639
F value 22.87*** 17.61*** 18.28*** 21.53***
Table IV. R2 0.9422 0.7317 0.5981 0.6138
Analysis by Null value α¼0 α¼0 α¼0 α¼0
technology innovation Test statistics 4.48*** 4.12*** 3.28*** 3.53***
of service Notes: *po 0.1; **p o0.05; ***p o0.01
decreased (Korea: 1.046→0.7906→0.719→0.6375, Japan: 0.8405→0.7392→0.6681→0.5768, the The effect of
USA: 0.6403→0.5375→0.3747→0.3327, the UK: 0.8416→0.7392→ 0.6681→0.5768). The results technology
show that market demand diffusion receives influence from service technology innovation and innovation
rejuvenates in mobile communication market. Post adopters gradually request new technology
when they completely utilized the technology after adopting the ICT products. Therefore,
rejuvenation is achieved under high innovation effect, whereas imitation effect decreases due to
the consolidation of competition. 1715
4.3.2 H2. This study examined the influence of production technology innovation on
ICT service market demand diffusion, and Table V shows the results before and after the
adoption of smartphone. Smartphone started to be used in Korea and Japan when iPhone 3S
was on shelf in 2009. However, due to the vitalization of the global market, products from
the American market could enter the Korea market, because same code division multiple
access method was used. On the other hand, products from the European market could enter
the Japanese market, because same time division multiple access method was used. Since
the possibility of occurrence increased after IMT-2000, which is the 3rd Generation
technology under global roaming, data that were partitioned using the same standard is also
used (e.g. in the American and English markets).
According to the analysis results, the innovation effect of technology innovation decreased in
Korea, Japan, the USA, and the UK (Korea: 0.00021→0.00012, Japan: 0.000126→0.000066,
the USA: 0.00688→0.000812, the UK: 0.000372→0.000124), while imitation effect increased
(Korea: 0.5863→0.6375, Japan: 0.5257→0.5768, the USA: 0.1779→0.3327, the UK: 0.5367→0.5768).
If the time of smartphone adoption is standardized to 2007, innovation effect would decrease to a
greater extend (Korea: 0.000999→0.00012, Japan: 0.000361→0.000066), and the imitation effect
would increase to a greater extend (Korea: 0.4412→0.6375, Japan: 0.4439→0.5768).
The results demonstrate that market demand diffusion received influence from product
technology innovation and became rejuvenation in mobile communication market. Although
the number of innovators were small since post adopters did not have a chance to try the new
technology, innovators increased because of the high usefulness following by the use of
new technology (Table VI).
Korea Before 1 Before 2 All Japan Before 1 Before 2 All

(100T) 1984~2006 1984~2008 1984~2014 (100T) 1981~2006 1981~2008 1981~2014
p 0.000999 0.00021 0.00012 p 0.000361 0.000126 0.000066
q 0.4412 0.5863 0.6375 q 0.4439 0.5257 0.5768
F value 19.29*** 17.57*** 14.96*** F value 41.20*** 22.12*** 10.26***
R2 0.671 0.6546 0.6073 R2 0.8414 0.776 0.7182
NV α¼0 α¼0 α¼0 NV α¼0 α¼0 α¼0
TS 2.89*** 2.95*** 2.93*** TS 3.24*** 2.82*** 1.70*
The USA Before All UK Before All
smartphone smartphone
(100T) 1984~2006 1984~2014 (100T) 1985~2006 1985~2014
Bass diffusion model
p 0.00688 0.000812 p 0.000372 0.000124
q 0.1779 0.3327 q 0.5367 0.639
F value 50.61*** 92.65*** F value 15.07*** 21.53***
R2 0.8938 0.8241 R2 0.5644 0.6138
Table V.
White noise test Comparison between
Null value α¼0 α¼0 Null value α¼0 α¼0 before and after
Test statistics 2.98*** 4.01*** Test statistics 2.59** 3.53*** technology innovation
Notes: *p o0.1; **p o0.05; ***p o0.01 of product
IMDS 5. Discussion and limitations
117,8 The ICT market rapidly diffuses all over the world and converges with a variety of
industries, so its influence is increasing. If ICT has had an impact on other industries
due to its rapid expansion, such impact would then have an impact back on ICT.
The increase in influence increases the communication speed due to service
technology innovation, influence of additional factors also exists. Such impact is due to
1716 complement goods and services. Especially in the mobile communication market,
smartphone has a strong influence on various industries such as smartTV, IoT,
Fintech, and O2O. Significance increases and diffusion accelerates due to the ICT’s
influence on other industries and its convergence with industries. Despite such
significance, previous studies emphasized the mobile communication market’s service
technology innovation and cultural direction (Lee et al., 2014, 2015; Lee, Trimi and Kim,
2012b; Yang et al., 2013). Moreover, since many studies used survey, which is the snapshot
of the actions at only the measurement time, they failed to describe user-behavior over
a long period.
This study examines the factors that influence demand diffusion in the mobile
communication, a typical ICT market, by investigating technology innovation in the service
and product markets, which are complementary markets. Using this method, rejuvenation
in the ICT market caused by service technology innovation and product technology
innovation was addressed. First, post adopters understand the technology to a better extend
and make rapid changes in the service technology generation in the ICT market, leading to
high innovation effect and low imitation effect. Second, regarding product technology
innovation in the ICT market, innovation effect was low and imitation effect was high due to
adopters who get in touch with the new technology.
Comprehensively, since service technology innovation needs to increase the number of
innovator and decrease the number of imitators at the early stage, sources of continuous
innovation are required in order to maintain innovators. In contrast, product technology
innovation increases the number of imitators but decreases the number of innovators.
The scale is large, which will cause the number of adopters to increase geometrically.
Based on the results, technology innovation through the cooperation between service
companies and product companies is required for not only service innovation but also
product innovation.
This study has several implications as explained below. Bass (1969) stated that
innovation effect and imitation effect appear at the early stage of demand diffusion and
remain the same. Hague (2002) addressed that such forms change due to rejuvenation.
Lee et al. (2014, 2015) proved that enterprises change the forms of demand diffusion through
technology innovation in the saturated market. This study proved that technology
innovation, which changes the forms of such demand diffusion, depends not only on an
industry’s internal factors but also on a market that contains complementary relationships.
This not only derived results that can develop theoretical tool of the research trend, but also
can be utilized by ICT enterprises at this point in time when the ICT industry is affecting
Hypotheses Result
H1. Technology innovation of service has an impact on diffusion of ICT service Accepted
H1a: Technology innovation of the service has a positive (+) impact on innovation effects Partially accepted
H1b: Technology innovation of the service has a negative (−) impact on imitation effects Accepted
H2. Technology innovation of product has an impact on diffusion of ICT service Accepted
Table VI. H2a: Technology innovation of the product has a negative (−) impact on Accepted
Hypothesis innovation effects
verification results H2b: Technology innovation of the product has a positive (+) impact on imitation effects Accepted
other industries. Therefore, this study helps develop the demand diffusion theory and The effect of
practical business strategies. technology
This study divided the changing technology innovation into product and service to innovation
examine the forms of demand diffusion in the ICT market. However, there are a variety of
influence factors such as the vitalization of the O2O market, the vitalization of social
commerce, and subsidy. Thus, the limitations of this study are as below. This study used
subscriber data of only four main countries, but excluded the newly developed markets 1717
such as the Chinese market and Indian market. Second, this study failed to understand
the political influence, such as the impact and subsidy due to the rejuvenation of a
new market. Therefore, future research may consider such limitations to better clarify
the factors that affect demand diffusion and to understand the changes in forms in the
ICT market.
Notes
1. https://web.archive.org/web/20080316145401/www.logica.com/history+and+key+milestones/
350233679
2. http://wirelesswatch.jp/2014/07/09/world-first-camera-phone-the-kyocera-vp-210/
3. www.elessoft.com/2012/10/samsung-uproar-the-first-cell-phone-with-mp3-functionality/
4. www.mmsworldlondon.com/history.htm
5. Preissl et al. (2011).
6. www.itu.int/net4/itu-d/icteye/
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1719
Corresponding author
Eui-Bang Lee can be contacted at: leeeuibang80@naver.com
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The effect of technology innovation on mobile communication and mobile

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Researcher Contents The result about technology innovation

3. Research model and hypotheses

3.2 Research hypothesis

4. Data collection, research method, and result

4.2 Research method

xðt Þ ¼ b1 xðt1Þþb2 N n ðt1Þþeðt Þ (2)

N n ðt1Þ ¼ N 2 ðt1ÞN 2 ðt2Þ:

4.3 Analysis result

Korea 1st Generation ~2G ~3G ~4G

Korea Before 1 Before 2 All Japan Before 1 Before 2 All

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